Wall St vs. Main St: Courts Beginning To Side In Favor Of Foreclosed Property Owners

RISMEDIA, October 27, 2009—Agents involved in foreclosures and short sales may need to begin to disclose the possibility of serious property transfer defects associated with these types of lender controlled sales.
If recent court decisions are any indication, we could be headed for an explosion of litigation in this area.
And now, Massachusetts Courts have revealed the possibility that unlawful foreclosures, dating back to 1989, might be invalidated and that buyers of foreclosed properties and short sales may have clouded titles.
The implications are enormous for title companies, bankruptcy attorneys, real estate agents, those facing foreclosure, and those who have lost their homes.
The problem stems from the collision of two worlds. It illustrates what can happen when the new world fails to acknowledge or understand the old. It is change that takes place without the cooperation of all affected parties.
Real property law has an ancient tradition. But, its laws and their purpose are not always apparent to those who want to change those traditions to benefit themselves.
In the case of maintaining a public chain of title to real property, it was thought to be essential and generally required by the law.
For hundreds of years, no one ever thought of any reason to change it. It was thought to be part of the public good.
That is, until Wall Street saw the money making potential in credit derivatives.
Credit derivatives are packages of debts such as car loans, student loans, credit card debts, and mortgage loans to name a few. These are collected, rated according to their risk, and sold to investors around the world.
One small problem; if you are going to bundle mortgages from every county in the country, you would have to physically send someone to every county recorder’s office on multiple occasions and pay multiple recording fees. It was costly and cumbersome to those responsible for affecting the recordings.
Their solution? Stop recording the assignments in public and track them instead in an electronic data base that the major lenders would operate through a cooperative entity. That entity is known as Mortgage Electronic Registration Systems (MERS). In my opinion, not only did it save them a fortune in county fees and manpower, it turned out to be a cash cow.
Well, good for them, right? They figured out how to bring technology to the process and were handsomely rewarded. Never mind that the cost of maintaining a county recording system is paid, in part, by the recording revenue. They still have to maintain the apparatus, but now they aren’t receiving the revenue intended to maintain the system. Of course, this comes at a time when many counties are struggling to provide necessary services to their residents.
But, as with many new ideas, there are unintended consequences that are now coming to light as state after state are enforcing basic property rights.